There are 69 below-market-rate units that will be part of the 282-unit Avant Housing development at 900 Folsom St. in South of Market.

A woman stands on stage in the auditorium at the San Francisco Main Library, reaches into a small box wrapped in gold aluminum foil, pulls out a piece of paper and reads into the microphone: “282 is 442396.”

A baby’s cry of “Mama!” fills the room. A woman rushes in and asks a man seated at a table if she’s in the right place, showing him a photo on her smartphone of a red raffle ticket.

“What’s your name?” he asks, checking an entry list.

The woman on stage reaches back into the box to retrieve another piece of paper. “283 is 443969,” she says, before repeating the process. “284 is 443831.”

The scene continues robotically for several hours.

Once read aloud, the number is typed into a laptop computer to be displayed on the screen above the stage for the hundred or so people sitting or standing around to see.

The below-market-rate rental housing lottery is the frontline of San Francisco’s affordability crisis. It is one answer The City has for those struggling to afford to pay market-rate rent. Developers have requirements to help create below-market-rate housing either through fees to help fund other construction projects or a percentage of onsite units, which are then obtained through a lottery process overseen by the Mayor’s Office of Housing. If there’s more development, then there are more of these units going on the market — but also apparently more demand for them.

In 2010, there were no new below-market-rate units, only a lottery for each of the 14 re-rentals of existing ones.

This year, there have been 244 such rental units available through the lottery, with 12 re-rentals. Last year, the lottery had 201 below-market-rate units, of which 13 had been rentals of existing ones.

FACES OF THE LOTTERY

One of the people at the recent Main Library lottery drawing was Robert Mendez, 40, an airport service agent who is about to lose his home.

Mendez, his wife and two children had to vacate their $800-a-month, rent-controlled apartment in South of Market by the end of August over what Mendez says was a dispute with the landlord who wanted them out.

Mendez was one of the 2,145 people who entered the housing lottery for 69 below-market-rate units that just went online at the newly built 282-unit Avant Housing development at 900 Folsom St. The city permitting process for the project began in 2008 and construction followed in 2011.

Mendez’s number was not called that day. He doesn’t know what he will do — maybe rent a hotel room. He is angry about the changes he is seeing in San Francisco.

“I was raised here, I went to school here, I graduated here, I work here,” Mendez said. “A lot of families are being forced out from The City and going elsewhere. We are one. There’s a lot of gentrification going on. You can see it right here. You got $3,000, $4,000 apartments for rent month-to-month. Who can afford that?”

For many, the below-market-rate lottery is no answer. The chances may seem about as good as actually winning the state lottery and becoming a multimillionaire. Mendez said he is also pursuing other housing options.

“I try and keep a positive attitude toward stuff,” he said. “You got to, otherwise you’ll break down. I can’t do that, you know. I’m a pretty strong-willed person. You have to keep a positive attitude.”

Since the sheer demand for below-market-rate units far outpaces the supply, it takes a certain amount of patience. But some people have no time to wait. And some have been waiting for years.

For Michael Tebow, 32, it was just another luckless lottery since moving to San Franciso four years ago.

“This is like the ninth or 10th one I’ve been to,” Tebow said. “I think I was 300 on one of the lotteries about a year and a half ago.”

Tebow lives with his girlfriend in a Richmond district two-bedroom apartment that they pay $1,750 a month to rent.

“If we could pay a lot less we would definitely want to,” Tebow said. “It’s upsetting. I was hoping this was going to be the one. This new building looks pretty nice.”

Tebow said from his experience, the pool of lottery applicants has grown significantly in the past two years.

“There were 700 [at] the first one I went to,” he said.

Meanwhile, it seems San Francisco’s rents are only continuing to escalate while pressures on tenants to give up their rent-controlled apartments increase as well.

The median rent of a two-bedroom apartment in San Francisco is $4,000, up from last year’s $3,850, according to Priceonomics, a data-crawling service startup based in the Mission. The median rent prices for a studio climbed from $1,895 to $2,300 during the same time frame, and from $2,795 to $3,120 for a one-bedroom.

A WIN IS NOT A GUARANTEE

After the 500th number was pulled from the box, the lottery officially closed.

The first five numbers selected were those who were displaced from the Western Addition in the 1960s as a result of actions taken by the now-defunct Redevelopment Agency. This group of people are given priority under the lottery.

Another five were given a special preference for having been displaced through the Ellis Act, a California law that allows landlords to evict tenants in order to get out of the rental business. This is a new priority class created in response to the rise in such evictions in San Francisco.

What happens next is another process full of uncertainty.

The developer calls those who won in order, offers them the units and then reviews their qualifications, including things like tenant and credit history.

The below-market-rate units up for grabs were 14 studios at $899 a month, 25 one-bedrooms at $1,022, and 30 two-bedrooms at $1,139. They are available for those who earn no more than 55 percent of the area median income, which for a single person is $37,350 a year and $53,400 for a family of four.

By contrast, the market-rate units available at the 900 Folsom St. building are going for $2,882-$3,437 a month for studios, $3,060-$4,071 for one-bedrooms and $4,333-$6,372 for two-bedrooms, according to the property’s website.

IMPROVING THE PROCESS

The process to apply is admittedly cumbersome. Applications must be filed at the specific new building sites to get tickets for the lottery. But that could change.

Maria Benjamin, director of the below-market-rate unit program at the Mayor’s Office of Housing, said the office is working to launch an online application process this fall in which people would be able to submit one application for all available sites. Other initiatives are also in the works, such as better organizing the listings for below-market-rate
opportunities.

“It is difficult for folks who have to enter four or five lotteries before they ever get their number called,” Benjamin said. “It can be frustrating. We just want to make sure that we can make it as customer-friendly as we possibly can.”